buying opportunities in junior mining stocks

We have been experiencing an uncertain investment climate for junior mining shares since about March. When the price of gold jumps significantly, shares in gold producers rise several dollars in one day, yet shares of companies with large gold reserves and resources in the ground that have yet to attain production do nothing. One might think that a large increase in the value of assets in the ground would benefit shares prices, but in many cases, that is not so. The only exception appears to be potash stocks. Is the general economic climate so uncertain that investors have become extremely skittish and only want to invest in junior mining companies when they are obvious winners? That appears to be right. Mass psychology rules stock markets, and right now, with the U.S. housing and credit crisis, General Motors in trouble, astronomical U.S. debt, Middle East strife, rocketing oil prices, no wonder investors would like to have a feeling of confidence before plunking down their hard earned cash. However, well-respected mining and market analyst, John Kaiser (www.kaiserbottomfish.com), is taking a bullish view. He notes that there is a "growing disconnect between the strength in commodity prices and the worsening slump for the resource juniors. Although metal prices, in particular copper, the bellwether for the business cycle, are making new highs or holding at levels well above their historic long term averages, juniors with pounds or ounces [reserves/resources] in the group are being priced as if their advanced projects are dead in the water. This creates an extraordinary bottom-fishing opportunity.? Kaiser concludes that if the world economies are not dragged down by problems in the U.S., there "will be a sharp upwards repricing of the juniors, a doubling to tripling before any paper starts coming into the market. Early 2009, after the U.S. election, is the most probable time for this inflection to sweep up the juniors, but, because markets anticipate the future, it could happen any time.? Yes, we could use some good news on the economic front, but meanwhile resource stock investors may want to research various companies seeking an undervalued gem because junior mining stocks are on sale. What is it going to take for investors to realize that there are many undervalued junior mining shares? To put it bluntly - greed has to overcome fear. And I don't mean greed in a negative context. Every investor needs some kind of positive outlook for his or her particular financial situation, plus a positive outlook on the investment of Ellsworth Dickson, Editor in Chief Email: editor@resourceworld.com T: 604 484 3800 | 1 877 484 3800 | F: 604 685 3833

editor's comments

Ellsworth Dickson choice. Unless you are one of those people that think civilization is going to collapse, the world still needs minerals - lots of them. After all, the six billion people on this planet all want a decent life. That takes metals and minerals. Economic mineral deposits are difficult and expensive to find and develop. It so happens that numerous junior companies on the Venture Exchange own or have optioned huge and very valuable mineral deposits. In his Epilogue, David Duval discusses the present state of the mining industry and Canaccord Capital's Hoesgen twins are of the view that uranium stocks have bottomed and investors may want to seek out some quality companies - see page 28. Rod Blake also addresses the state of Venture Exchange mining stocks on page 30. On the TSXV chart below, based on historical precedents, the crossing of the descending triangle is where Rod is forecasting a change in sentiment and a general increase in TSXV share values. I hope he's right. Also in this issue, we present a feature on potash, currently a bright spot in the mining sector. We have two articles on diamonds - a review of mostly Canadian company activities plus an interesting story on coloured diamonds. We were fortunate in being able to send contributing writer Brian O'Hara on a field trip to the Yukon where he visited no less than 10 projects. Thanks to the Yukon Territorial government for organizing this trip. In addition, since the Yukon is steeped in mining history, Rick Crosby has written a companion article on the Klondike Gold Rush. In the Oil & Gas section, Joel Chury reviews the British Columbia Horn River Gas Play and Peter Caulfield examines how EnCana uses CO 2 injection to extend the life of oil fields. n August 2008 www.resourceworld.com 7

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